Muny Light and the Default

Dennis Kucinich was thirty-one years old when he became mayor of Cleveland in nineteen seventy-seven, and almost immediately the city's financial establishment began a quiet campaign to destroy him. The issue was a power plant.

The city of Cleveland owned a municipal electric utility called Muny Light that sold electricity to residents in competition with the private Cleveland Electric Illuminating Company. The banks that held Cleveland's credit regarded Muny Light as an inconvenience and wanted it sold to the private utility, which would eliminate the competition and presumably charge higher rates. The banks made their position clear: sell Muny Light, or we will not renew the city's credit.

Kucinich refused. He believed Muny Light's competition kept electricity rates down for Cleveland residents, and he suspected the banks and the private utility of colluding to force a sale that would benefit them and harm the people who could least afford higher electric bills. The banks called his bluff.

At midnight on December fifteenth, nineteen seventy-eight, Cleveland became the first major American city to default on its debt since the Great Depression. The city could not pay fourteen million dollars in short-term notes. The banks would not renew the credit. The default was total and public.

Kucinich was blamed. He lost his reelection bid in nineteen seventy-nine. He left office in November of nineteen seventy-nine, the boy mayor who had taken on the banks and lost.

In nineteen ninety-eight, the Cleveland City Council honored him for his courage and foresight. By then, city officials and the United States Senate had found that the banks and the private utility had in fact engaged in anticompetitive behavior. Muny Light was not sold. It still operates today as Cleveland Public Power, providing electricity to hundreds of thousands of residents. Kucinich turned out to have been right.